How does Valero like to move oil? Pipe, barge, then rail

San Antonio-based Valero Energy Corp. ships crude oil from the Eagle Ford Shale to its refinery in Quebec by water – part of its strategy to use as much North American oil as possible instead of expensive imports.

But in a recent quarterly earnings call, an analyst asked if plans to reverse a pipeline in Canada would change the company’s plans and “maybe reduce the amount of the Eagle Ford barge crude up there?”

Valero’s response: Pipelines are best, and water is the next best alternative for getting oil to its refineries.

“I guess the way we would see it is that the pipeline delivery would be the most advantaged and then second to that would be the barrels that we get over the water, and then finally would be the tranche that were currently taking by rail,” said Gary Simmons, vice president – crude, feedstock, supply and trading. “So if barrels starts to drop off it would probably be the rail volume that you would see fall off before the volume that we are taking over the water.”

Valero has a permit to export U.S. oil to its Quebec refinery, which receives North American oil by both water and rail.

U.S. companies have been moving crude oil by pipeline, barge, tankers, rail and truck. And Eagle Ford crude has been flowing out of South Texas by every one of those methods, including moving from ports to other refining centers.

Valero’s strategy has been to process as much of the less-expensive North American crude oil at its refineries instead of the pricier imported oil. Bill Klesse, chairman and CEO said in Tuesday’s call with analysts that the company “will continue to benefit from the increased North American oil and gas production.”